(1) That a significant portion of the oil and gas underlying
this state is subject to development pursuant to leases or other
continuing contractual agreements wherein the owners of such oil
and gas are paid upon a royalty or rental basis known in the
industry as the annual flat well royalty basis, in which the
royalty is based solely on the existence of a producing well, and
thus is not inherently related to the volume of the oil and gas
produced or marketed;

(2) That continued exploitation of the natural resources of
this state in exchange for such wholly inadequate compensation is
unfair, oppressive, works an unjust hardship on the owners of the
oil and gas in place, and unreasonably deprives the economy of
the state of West Virginia of the just benefit of the natural
wealth of this state;

(3) That a great portion, if not all, of such leases or
other continuing contracts based upon or calling for an annual
flat well royalty, have been in existence for a great many years
and were entered into at a time when the techniques by which oil
and gas are currently extracted, produced or marketed, were not
known or contemplated by the parties, nor was it contemplated by
the parties that oil and gas would be recovered or extracted or
produced or marketed from the depths and horizons currently being
developed by the well operators;

(4) That while being fully cognizant that the provisions of
section 10, article I of the United States Constitution and of
section 4, article III of the Constitution of West Virginia,
proscribe the enactment of any law impairing the obligation of a
contract, the Legislature further finds that it is a valid
exercise of the police powers of this state and in the interest
of the state of West Virginia and in furtherance of the welfare
of its citizens, to discourage as far as constitutionally
possible the production and marketing of oil and gas located in
this state under the type of leases or other continuing contracts
described above.

(b) In the light of the foregoing findings, the Legislature
hereby declares that it is the policy of this state, to the
extent possible, to prevent the extraction, production or
marketing of oil or gas under a lease or leases or other
continuing contract or contracts providing a flat well royalty or
any similar provisions for compensation to the owner of the oil
and gas in place, which is not inherently related to the volume
of oil or gas produced or marketed, and toward these ends, the
Legislature further declares that it is the obligation of this
state to prohibit the issuance of any permit required by it for
the development of oil or gas where the right to develop,
extract, produce or market the same is based upon such leases or
other continuing contractual agreements.

(c) In addition to any requirements contained in this
article with respect to the issuance of any permit required for
the drilling, redrilling, deepening, fracturing, stimulating, pressuring, converting, combining or physically changing to allow
the migration of fluid from one formation to another, no such
permit shall be hereafter issued unless the lease or leases or
other continuing contract or contracts by which the right to
extract, produce or market the oil or gas is filed with the
application for such permit. In lieu of filing the lease or
leases or other continuing contract or contracts, the applicant
for a permit described herein may file the following:

(1) A brief description of the tract of land including the
district and county wherein the tract is located;

(2) The identification of all parties to all leases or other
continuing contractual agreements by which the right to extract,
produce or market the oil or gas is claimed;

(3) The book and page number wherein each such lease orcontract by which the right to extract, produce or market the oil
or gas is recorded; and

(4) A brief description of the royalty provisions of each
such lease or contract.

(d) Unless the provisions of subsection (e) are met, no such
permit shall be hereafter issued for the drilling of a new oil or
gas well, or for the redrilling, deepening, fracturing,
stimulating, pressuring, converting, combining or physically
changing to allow the migration of fluid from one formation to
another, of an existing oil or gas production well, where or if
the right to extract, produce or market the oil or gas is based
upon a lease or leases or other continuing contract or contracts
providing for flat well royalty or any similar provision for compensation to the owner of the oil or gas in place which is not
inherently related to the volume of oil and gas so extracted,
produced and marketed.

(e) To avoid the permit prohibition of subsection (d), the
applicant may file with such application an affidavit which
certifies that the affiant is authorized by the owner of the
working interest in the well to state that it shall tender to the
owner of the oil or gas in place not less than one eighth of the
total amount paid to or received by or allowed to the owner of
the working interest at the wellhead for the oil or gas so
extracted, produced or marketed before deducting the amount to
be paid to or set aside for the owner of the oil or gas in place,
on all such oil or gas to be extracted, produced or marketed from
the well. If such affidavit be filed with such application, then
such application for permit shall be treated as if such lease or
leases or other continuing contract or contracts comply with the
provisions of this section.

(f) The owner of the oil or gas in place shall have a cause
of action to enforce the owner's rights established by this
section.

(g) The provisions of this section shall not affect or apply
to any lease or leases or other continuing contract or contracts
for the underground storage of gas or any well utilized in
connection therewith or otherwise subject to the provisions of
article nine of this chapter.

(h) The director shall enforce this requirement irrespective
of when the lease or other continuing contract was executed.

(i) The provisions of this section shall not adversely
affect any rights to free gas.

Note: WV Code updated with legislation passed through the 2016 Regular Session
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